Nvidia (NVDA) shares ended Friday's session down 4.4% at $225.32, paring back some of the week's earlier gains as the broader chip rally took a breather. Despite the pullback, the stock still closed the week roughly 4.7% higher, reflecting ongoing investor enthusiasm around artificial intelligence.
Earnings Preview and Options Activity
U.S. markets are closed for the weekend, with all eyes now on Nvidia's fiscal first-quarter results, scheduled for release after the closing bell on Wednesday. Options pricing suggests traders anticipate a potential 7% swing in the stock price following the earnings report, placing the near-term trading range between $210 and $241.
The earnings release has become a critical barometer for the broader AI trade, with investors closely watching whether the AI data center spending cycle can continue to drive major indices like the Nasdaq Composite and S&P 500, both of which have surged in a rapid spring rally.
Market Context and Sector Performance
Friday's selloff was part of a broader downturn in chip stocks. The Philadelphia SE Semiconductor Index slid 4%, with Nvidia, AMD (AMD), and Intel (INTC) all posting losses of 4.4%, 5.7%, and 6.2%, respectively. The Nasdaq Composite snapped a six-week winning streak, pressured by higher crude oil prices and rising Treasury yields.
Kenny Polcari, chief market strategist at Slatestone Wealth, commented, "There's a realization that the market had gotten way ahead of itself," noting that traders were caught up in the "momentum AI trade." Matthew Keator, managing partner at the Keator Group, added that the recent U.S.-China meeting seemed more like a reset without clear short-term results.
Earnings Expectations and Analyst Views
Nvidia is set to report results on May 20 around 4:20 p.m. ET, followed by written remarks from CFO Colette Kress and an earnings call at 5 p.m. ET. Analysts polled by Visible Alpha expect revenue of $78.50 billion and adjusted earnings of $1.75 per share, according to Investopedia.
Of 13 analysts surveyed, 12 rate Nvidia as a "buy," with an average price target of $274, roughly 20% above Friday's closing price. A strong report could push shares up toward $241, while a miss might drag them down to around $210.
China and Geopolitical Factors
Investors are also watching developments related to China. Reuters reported that the U.S. has approved about 10 Chinese companies, including Alibaba (BABA), Tencent, ByteDance, and JD.com (JD), to purchase Nvidia's H200 chips, though shipments have not yet begun. Lenovo confirmed it is among the firms allowed to sell H200 chips in China.
However, U.S. Trade Representative Jamieson Greer noted that chip export controls were barely discussed in recent Beijing meetings. President Donald Trump suggested China is delaying H200 deliveries to focus on developing its own chips.
Competitive Landscape
The AI chip race is intensifying. Some traders now view Cerebras, which recently went public, as a direct challenger to Nvidia. Bob Lang, who runs Explosive Options, described its IPO as one of this year's most "important" and "relevant" for that reason.
Allen Bond, portfolio manager at Jensen Investment Management, noted that AI and energy prices are pushing markets in "almost parallel tracks." For Nvidia, he emphasized that the company's report must provide proof that backs up the stock move and offers a "signal into the health of the rest of the industry." Yung-Yu Ma at PNC Financial Services Group said the key question is whether Nvidia can "defend its leadership position."
Broader Market Implications
Even strong earnings may not boost chip stocks if oil stokes inflation, yields jump, or China sales remain constrained. Investors could pull back from high-priced names despite good results. "A smaller set of names" is driving index gains, said Patrick Ryan, chief investment strategist at Madison Investments, calling it "not necessarily a healthy market."
